Grape has cemented its place in cuisines and wines over time, across the world. The grown-in-India varieties haven’t missed out on getting popular either. Exports are a proof. Grape exporters, smile.
BY Anishaa Kumar | November 2017 Issue | The Dollar Business
Once known as the food of gods and kings, grapes today have evolved to be a fruit that has found favour, be it in the form of the main ingredient in your favourite bottle of wine or the fruit that makes your rather bland but healthy bowl of salad palatable, across the globe. Grapes are also available in a myriad of colours – red, blue, amber, green and black to add a touch of colour to our food. To add to that, grapes are rich in antioxidants, making them a popular snacking alternative. Naturally, the demand for grapes across the world has been increasing. While India still lags behind countries like China, Italy and US in production of the fruit, the growth in demand for Indian grapes shows that there are opportunities aplenty for both farmers and exporters.
In India, the major grape producing state is Maharashtra with the regions of Nasik and Sangli being the main cultivation areas. Apart from Maharashtra, other states that produce grapes are Andhra Pradesh, Karnataka, Tamil Nadu and Mizoram. When it comes to varieties produced in India, according to the Agricultural and Processed Food Products Export Development Authority (APEDA), Thompson Seedless white and its variants, is the most cultivated variety of grapes. Others varieties that are cultivated are Bangalore Blue, Anab-e-Shahi, Dilkhush, Sharad Seedless and Perlette.
A Long way to go
While production and exports have been growing over the last couple of years, India remains the 11th largest exporter of grapes in the world. Our export volume in CY2016 was as low as 1/6th of the largest exporter Chile. But just because we are so far behind, is no cause for despair. Between FY2012 and FY2017 India’s exports of fresh grapes have seen a growth of 46.08% — although in FY2015 the exports had dropped 34% y-o-y, due to the global economic slowdown, before increasing 28% y-o-y in FY2016.
Some of India’s largest export markets include Russia, Netherlands, UK and Germany with Netherlands accounting for more than a third of India’s exports – in FY2017, Netherlands imported $91.84 million worth of grapes from India. India also happens to be the country’s fourth largest source of imported grapes. Other important export markets for India include US and various Asian countries like Bangladesh, China, Thailand and Malaysia. Amit Kalya, Business Development Manager at Nasik-based Kalya Exports explains, “UK has always been a stable market for us. Volumes are also growing in the Russian market. In Asia, China has opened up.” Exporters say, Australia and New Zealand are also emerging as potential export markets.
While EU accounts for a major share of our exports of fresh grapes, finding acceptance in EU has not come easy. As has been the case with most of our agricultural produce, grape exporters have also faced challenges in adhering to EU’s stringent regulations, especially with those related to Maximum Residue Limit (MRL). Grape farmers have had to learn about the acceptable safe farming practices as per EU guidelines to be able to produce grapes that would qualify for the required EU certifications. In order to assist exporters, APEDA launched GrapeNet in 2007, an online platform for exporters to share information and track their entire supply chain. Exporters, Kalya adds, are also these days more aware of the regulations after having had some of their consignments that did not pass the stringent tests returned. The Indian government, Kalya says, has also become a lot stricter when it comes to exports as a single consignment failing a test attracts intense scrutiny and hurts the entire exporting fraternity. Exporters have also taken it on themselves to train and educate farmers.
While there still are cases of consignments being stopped due to quality concerns, they are few and far between. Rajaram Sangle, Director of Nasik-based Sangle Agro Processing Pvt. Ltd. concurs, “We had problems, initially in 2003, when the new quality regulations came into being. But then, we worked on the entire set up, got two agronomists on board, etc. We, the grape exporting community, have set a standard operating procedure (SOP) for ourselves. We also coordinated with APEDA to find the most efficient processes. We educate and train our farmers on how to produce the different varieties that are in demand and how to reduce residue. We also formed an organisation – Maharashtra Rajya Draksha Bagaitdar Sangha (MRDBS) – through which we conduct seminars for grape farmers.”
Value in variety
Indian exporters have overcome the regulatory issues through education and efforts, and now have to cross the hurdle of producing the varieties of grapes that are in high demand in international markets. So, if not variety, what has been fuelling the demand? Sangle says that price has a big role to play. He explains, “If we compare our produce to that of the produce of other major producing nations, we do not have many of the varieties that are are in demand. What usually drives demand for our produce is that Indian grapes are cheaper than that produced in South Africa, Peru, Brazil, etc. India mostly exports white grapes.” Sangle adds that nowadays India is also exporting black grapes which are in demand in the market, having acquired the expertise to farm them. Internationally, he says that there is more of a demand for coloured grapes but India does not have these varieties. This he says, is the biggest hurdle exporters face.
Cultivating the new varieties that are in demand however is not easy as the seeds are usually patent protected. While the current production of white seedless and its clones finds demand in the domestic market, exporters say the scope in exports is limited. Sangle adds, “These patented varieties also cost a lot and work on the basis of royalty. So, the person who creates the variety, the breeder, has to be given a royalty, every year. Also, because of the lax intellectual property (IP) regulations in India, breeders located outside India are concerned about violation of IP rights. Some exporters, including us, are now trying to import these new varieties. These varieties of grapes have special features such as low production cost, better yield, bright colour and of course good taste. They also have a longer shelf life and can change the fortune of an exporter.”
The government has also been taking interest in helping exporters acquire the technology and processes to cultivate the new varieties that are in demand. Dr. S. D. Sawant, Director, ICAR-National Research Centre for Grapes, however believes that we will take time to start producing these varieties. He says, “Even if we import, there will be challenges as the grapes will have to pass multiple stages of testing. It will take at least 3-4 years for the process to get completed and cultivation to start.” Sawant adds that the project is expected to receive funding soon and once that is in place, negotiations with international producers such as GRAPA will be initiated. Sawant further adds that the negotiation will also be challenging. “We will need to see which of these varieties the producers are willing to share with us. Many of them are being exported from our competing countries. For example, Early Sweet is a variety that was introduced by GRAPA in South Africa and these grapes are being exported from South Africa to Europe during January-February. Now, if that variety is given to India, we will also grow the same and export them to the same market in the same period, giving tough competition to South African exporters. South African producers may therefore not want to sell the product to India,” he explains.
A Gamble of Profits
Despite myriad challenges, exporting grapes remains a fairly profitable business. Exporters say that in a good season profit margins in 5-10% range is attainable. Many exporters have also tied up with supermarkets outside the country which they say is usually a safer way to export as they offer a fixed price, irrespective of the market condition. A major factor that lowers the profit margin is the costs incurred towards meeting the regulatory requirements for export, which includes pack house processes, cold storage rentals etc. They add at least a 20-30% to the final cost of the product. Sangle adds, “The business has had its ups and downs. This year too there may be a decline in profits as grapes from competing countries came into the market at the same time as ours, resulting in a decline in prices. For example, a box of grapes that was earlier being sold for Rs.100 is now being sold for Rs.40.”
Time to say Cheers?
The vagaries of the trade not withstanding, with the demand for grapes rising around the globe, exporting grapes remains a profitable venture. Exporters say that exhibitions that the government bodies facilitate are of great help when it comes to interacting and finding stable, long-term buyers. Sangle explains, “We participate in many of the big fruit exhibitions across the world. At these exhibitions, we interact with new buyers. We invite these prospective buyers to see our facilities. That is how new business develops.”
New markets are also opening up for Indian grape exporters, and new buyers are keen to try our produce. Grape exporters, producers and the government have begun a concerted effort towards cultivating the newer varieties of grape that are now in demand the world over. The regulatory hurdles have been mostly overcome. The sector has tremendous potential with the demand for fresh grapes as well as wine on the rise. With sustained efforts towards acceptable and safe cultivation practices and aggressive marketing push, it may soon be time for grape exporters to raise a toast!
TDB: What needs to be done to increase exports of grapes from India?
Amit Kalya (AK): Producers are already working on newer varieties to be cultivated in India that can help give us a better market share and as well as fetch better prices in the global market. In addition, exploring new markets can help grow exports of Indian grapes.
TDB: How difficult has it been to penetrate the European market. Are Indian producers equipped to adhere to EU compliance requirements?
AK: Today, Indian exporters of grapes have a better understanding of the compliance requirements. Exporters have been working with and educating farmers on how to produce goods that follow the rules and requirements of the importing country. We try to keep our farmers updated. The government also provides updates on new regulations and has set up accredited testing labs for the same. Of course, there are costs involved. If you need a specific report, the labs may charge a small sum for it, but then there is also a subsidy on this. So, overall there are not too many challenges. There may be problems for consignments in some places but these are usually not the case when you are exporting to supermarkets as their conditions are well laid out. Overall, the understanding of the procedures and regulations has improved.
TDB: Is the grape export sector open to new entrants. What challenges do new exporters face?
AK: Like in most sectors, in the grape sector too, every year, there are some new players who enter the market without proper understanding of the market. The exports of fresh fruits is a very different ball game than exports of other products. It is not like an engineering product which can be recalled and replaced. In the case of grapes, regulations have to be followed from the word get-go. It is perishable and this should be understood by any and all exporters. They need to properly understand the fruit quality, how it should be packed, etc. If anything goes wrong, it impacts not only them but the entire Indian market.
TDB: Do you see exports of grapes growing in the coming days?
AK: I am expecting a steady volume growth like that in FY2017 in this financial year. While I can’t predict how long this export growth will continue, production will rise due to the addition in plantations for both the domestic fruit as well as the fruit that is cultivated for the export market. I believe exports will not decline over the next few years.
TDB: What has been the reason behind the growth in demand of Indian grapes?
Rajaram Sangle (RS): It is not that Indian grapes have a special quality. If we compare our produce to the international produce, we don’t even have as many varieties. What usually drives demand for Indian grapes is that it is cheaper than that of our competitors like South Africa, Peru, Brazil, US, etc. As our variety is cheaper, more people are buying it. India mostly exports white grapes. Internationally, there is more of a demand for coloured grapes but India does not produce this variety.
TDB: What kind of assistance do exporters need from the government?
RS: We need assistance in producing newer varieties of grape that are in great demand. Our biggest competitors like Chile and South Africa have the latest varieties which have better colour and taste. If we are able to cultivate these varieties, then India’s exports will flourish. The government is aware of this and is taking steps to help us produce the same. We have had discussions with the government and research centres on this aspect, and the government is now keen to import these varieties and conduct research on them so that we can start producing these varieties in India.
TDB: What profit margin can an exporter expect in this business?
RS: This is a highly perishable fruit and profit margin ranges between 5% to 10%. There is also a risk of losses as the prices in the international market are prone to fluctuations. For any decrease in international prices, the onus is on the exporters to match the price and absorb the loss in his margin. In India, it is the small farmers who grow grapes and exporters buy grapes from them at a fixed price, irrespective of the ongoing international price. So, the entire risk is borne by the exporter. People have a misconception that this is an easy business. You have to treat the farmers as a part of your family and work towards equipping them with education and technology to produce viable and healthy fruit.
TDB: What challenges does an exporter of grapes face?
RS: The business has had its share of ups and downs. There was a decline in exports in 2010 due to infestation. This year too there is a risk of losses as our grapes and those from competing countries reached the market at the same time, resulting in a decline in prices. It is also important to bring in different varieties as consumer preferences keep changing. The vagaries of consumer dynamics as well as that of the climate change are some of our biggest challenges.